On December 30, 2015, the Centers for Medicare & Medicaid Services (CMS) published its final rule establishing a prior authorization program for certain durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) items frequently subject to unnecessary utilization (the Final Rule). As noted in our commentary on the proposed rule  the Final Rule creates a “Master List” of items that could require prior authorization as a condition of Medicare payment as well as a subset list of items for which prior authorization is required. The provisions of the Final Rule are effective on February 29, 2016.

Master List

The Master List of DMEPOS items that could be subject to prior authorization includes items frequently subject to “unnecessary utilization,” which is defined as “the furnishing of items that do not comply with one or more of Medicare’s coverage, coding, and payment rules.”  The Final Rule creates an initial Master List of 135 items that are listed on the DMEPOS fee schedule with an average purchase fee of $1,000 or greater or an average rental fee schedule of $100 or greater, and meet one of the following two criteria:

• Identified as having a high rate of fraud or unnecessary utilization by any Office of Inspector General (OIG) or General Accountability Office (GAO) report of national scope published in 2007 or later; or

• Listed in the 2011 or later Comprehensive Error Rate Testing (CERT) program’s Annual Medicare Fee-For-Service (FFS) Improper Payment Rate Report Durable Medical Equipment (DME) and/or DMEPOS Service Specific Report(s).

The Master List will be updated annually and published in the Federal Register. Items will be aged-off the list after 10 years unless a subsequent OIG or GAO report identifies the item as having a high rate of unnecessary utilization. Items will also be removed from the Master List if they are discontinued, no longer covered by Medicare, or if the purchase amount drops below the payment thresholds described above. If the Healthcare Common Procedure Coding System (HCPCS) code representing a listed item is discontinued, the item will be updated and replaced with the equivalent item and code.

Required Prior Authorization List

As proposed, prior authorization is not required for all items on the Master List. Instead, CMS will create a Required Prior Authorization List comprised of a subset of items on the Master List. Many commenters to the proposed rule voiced concern regarding CMS’ decision not to identify which of the Master List items would be subject to prior authorization. In response, CMS stated its selection of items for the Required Prior Authorization List will be guided by factors such as geographic location, item utilization or cost, system capabilities, administrative burden, emerging trends, vulnerabilities identified in official agency reports or other data analysis. CMS also finalized its proposal to allow for national or local implementation of the prior authorization requirement based on geographic trends of unnecessary utilization in claims data analysis. CMS will publish the Required Prior Authorization List in the Federal Register 60 days before requiring prior authorization and will engage in other “education and community interaction[s]” to provide notice to suppliers.

Prior Authorization Process

Under the Final Rule, authorization requests must be submitted prior to furnishing the item and prior to submitting the claim for payment processing. Following submission, CMS or its contractors will conduct a medical review and communicate a provisional decision. In the event of a non-affirmative decision, unlimited resubmissions are allowed to correct errors and comply with documentation requirements. Expedited review requests are available but require documentation to demonstrate that the standard authorization process may “seriously jeopardize the life or health of the beneficiary or the beneficiary’s ability to regain maximum function.”  The Final Rule does not adopt the proposed approval or turnaround timeframes, citing potential access concerns highlighted in public commentary. To maintain “flexibility,” CMS will publish sub-regulatory guidance to implement the Final Rule and address the “operational logistics of the prior authorization process,” including timeframe and other submission requirements, at a later date.

In the Final Rule, CMS retains its position expressed in the proposed rule that a denial of prior authorization is not considered an initial determination for a claim of payment and, as a result, will not be appealable. An item on the Required Prior Authorization List that is submitted without an affirmative prior authorization decision will be automatically denied payment. Therefore, prior authorization is a condition of payment, but does not necessarily guarantee payment. Information that is only available after the claim is submitted may result in denial (e.g., duplicate claim, absent or improperly listed delivery date).

Analysis

Although CMS will provide suppliers with 60 days’ notice in the Federal Register before requiring prior authorization for new items, DMEPOS suppliers of Master List items should regularly take note whether items are included on the Required Prior Authorization List and update internal administrative and claims processes accordingly. Failure to do so puts DMEPOS suppliers at risk for claim denials related to items subject to prior authorization.